Blue Cross Blue Shield of Michigan's chief executive believes a proposal by the insurance industry to abandon the use of health status and medical histories to set rates for individual policies could aid reform efforts for the market in Michigan.

The offer by the Blue Cross Blue Shield Association, the national umbrella group for Blues plans nationwide, and the trade association representing commercial carriers, America's Health Insurance Plans, as a part of the national reform debate moves the issue in the right direction in Michigan, Blue Cross Blue Shield of Michigan CEO Dan Loepp said.

"Health rating is a core component of the traditional health-insurance business model," Leopp said. "The industry's willingness to give that up signals a desire to find common ground on reform. We hope that spirit will be evident here in Michigan as we work to fix our state's broken health-insurance model.

"We should capitalize on this to find more common ground and springboard reforms in Lansing."

Citing mounting losses, Blue Cross Blue Shield of Michigan continues to call for reforms in the individual insurance market. The Blues lost $133 million on individual policies in 2008 and projects it will lose $1 billion between 2009-2011.

The Blues claims the losses stem from its mission as the insurer of last resort, which means it must take everybody who applies for coverage, regardless of health status. As a result, the insurer says it gets stuck with the costliest population to insure under existing rules that allow commercial insurance carriers to reject applicants based on health status.

Lawmakers in Lansing, after failing to agree on reforms last year for the individual market, are now examining broader changes to make health coverage in Michigan more accessible and affordable.

To stem its losses in the individual market, Blue Cross Blue Shield of Michigan has changed the commission structure for insurance agents and is introducing new individual insurance products. Under the new commission structure that begins Match 30, insurance agents receive higher commissions for signing up healthy people for coverage and less for an unhealthy customer.

"We looked at what we can do to get those members into our (insurance) pool, so we had to make some tweaks to our commission structure along those lines," Blues spokeswoman Helen Stojic said. "We'd like to bring them in because that helps everybody in the pool."

A health-status questionnaire people are asked to fill out when applying for coverage is voluntary and used to direct eligible applicants into care-management programs, Stojic said.

Michigan Attorney General Mike Cox last week took issue with the health questionnaire and the new commission structure.

In a letter to Senate Majority Leader Michael Bishop, Cox wrote that the new commission structure "sets up a blatantly discriminatory process designed to discourage insurance agents from assisting or issuing Blue Cross policies to 'unhealthy' customers.

"Under this commission structure, it is clear which customers will be given priority and which customers will be treated like second-class citizens."

The questionnaire on an applicant's health status "flies in the face of the company's statutory obligations and social mission," Cox added.

"Blue Cross has no legitimate, statutorily authorized reason for soliciting this personal health information from its prospective customers," he wrote.